Fed Keeps Rates Steady, Warns of Rising Economic Risks

The Federal Reserve left its key federal funds rate unchanged at its May meeting, as uncertainty about President Donald Trump’s tariffs cast a shadow over the U.S. economy.

The federal funds rate, a benchmark for other interest rates, has held steady at 4.25% to 4.50% since December. Fed officials continue to back a cautious approach to rate cutting until they have more clarity on how Trump’s policy changes are affecting the economy.

Forecasting is never easy, “but that seems particularly true today, given the fluidity and the stop-and-start nature of the tariff implementation,” says LendingTree chief credit analyst Matt Schulz. “That makes things even trickier for the Fed.”

In a post-meeting statement, the policymaking Federal Open Market Committee (FOMC) notes that, “Uncertainty about the economic outlook has increased further.”

On one hand, “economic activity has continued to expand at a solid pace,” the Fed says, and the labor market is solid. But “inflation remains somewhat elevated.” On the other hand, the Fed judges “that the risks of higher unemployment and higher inflation have risen.”

What does another rate pause mean for you?

The rate pause is ultimately good news for savers, Schulz says. It means that today’s relatively high deposit rates are likely here for a bit longer.

Consumers can expect neither a rise in deposit account returns, Schulz says, nor a significant decline. “That means there’s still time for those looking for a new high-yield savings account or CD [certificate of deposit] to take advantage of today’s rates,” he says.

Odds are high that the rate pause will last a while, according to Schulz. “That’s because the uncertainty we currently see in the economy is going to take time to play out, barring any major reversals in Washington,” he says.

What are top money moves to make right now?

With rates frozen and economic conditions uncertain, you can make some moves to fortify your finances. Here are a few:

If you’re in the market for a CD, lock in one of today’s high rates. But first, be certain you will not need the money you plan to invest until the CD matures. “The last thing you need to do is pay a withdrawal penalty,” Schulz says.

Shift to a high-yield savings account (HYSA). Putting your money into an HYSA is a wise move, Schulz says. “Even though the returns are below last year’s highs,” he says, “they’re still far better than you’d find with a traditional savings at a megabank.”

Strengthen your financial foundation as much as possible. This includes working on paying down high-interest debts, building your emergency fund and improving your credit, Schulz advises. “That’s the best way to be ready for whatever lies ahead,” he says.

What the federal funds rate is and how it affects you

The federal funds rate target is established by the FOMC — the Fed’s monetary policy team — at meetings held eight times a year. Federal Reserve leaders set the range for the interest rates banks charge to borrow from each other overnight. 

Above all, the federal funds rate serves as a benchmark to establish other rates. Its movements can affect earnings on savings accounts, as well as payments on credit cards and loans.

The Fed sets a target range with upper and lower limits that are usually 0.25 percentage points apart.

Understanding Fed rate changes

Even shifts in expectations for the federal funds rate can affect rates overall, including long-term rates for products such as bonds, CDs and loans.

When does the Fed meet in 2025?

These are the remaining scheduled Fed meeting dates for 2025:

• June 17-18
• July 29-30
• Sept. 16-17
• Oct. 28-29
• Dec. 9-10